One bad car wreck. One raging kitchen fire. One major surgery. If you’re not careful, just one thing can derail years of financial progress.
That’s why insurance is the best defense for your life and finances. It protects you from the risks you just can’t afford to take.
But as important as insurance is to your financial plan, that doesn’t mean you have to overpay for the right coverage. Just how much do people pay for insurance on average? How much is insurance per month depending the kind you need?
We’ll take a look at the costs of the four main types of insurance you need—auto, homeowners (or renters), health insurance and life insurance.
How Much Should You Pay for Auto Insurance?
Screeech! Bang! There are few things worse than the jitters you get after a car accident. It doesn’t take long for the adrenaline rush to be replaced by anxiety over the cost of repairing or replacing your car. Thankfully, auto insurance softens the blow.
Do you have the right insurance coverage? You could be saving hundreds! Connect with an insurance pro today!
But how much does auto insurance cost? According to a study from AAA in 2020, the average American pays $1,202 for full-coverage car insurance and $644 for liability.1 (That works out to about $100 for full coverage or $54 for liability car insurance per month.)
Remember, though, that not all auto insurance bills are created equal. If Bubba next door drives his truck like a maniac and gets into a fender bender (or three) every year—and your driving record is squeaky clean—who do you think will get the bigger auto insurance bill? You guessed it. The insurance company will charge Bubba more because he’s riskier to insure.
Where you live can also be a factor in how much you pay. Here’s a look at the average cost of car insurance by state (please include data table from this article):
How Much Should You Pay for Homeowners (or Renters) Insurance?
Dorothy was right. There’s no place like home. And homeowners insurance is there to help protect your finances if something terrible happens to your home and everything in it.
The average homeowners insurance annual premium is $1,015.2 But homeowners insurance costs range widely depending on your situation.
Your cost will be based on the value of your home, your past history of insurance claims, what type of coverage you need, your credit score, if you need flood insurance, and how much your belongings are worth.
But here’s some good news. For most homeowners, your property insurance is usually included in your mortgage payment, so it doesn’t really feel like an extra expense at all.
Just like with real estate, the biggest factor that impacts how much you’ll pay for homeowners insurance is location, location, location. Folks who live in major cities and densely populated areas will likely have higher rates than those who live in more rural areas. And if you happen to live in a state where natural disasters are more common—think tornados, hurricanes and wildfires—you’re more likely to have higher insurance rates too.
Looking at the states with the highest and lowest homeowners insurance rates, it’s not very surprising to see that the states with higher rates have dealt with major natural disasters in the past few years:
The Most and Least Expensive States for Homeowners Insurance3 (Annual Premiums)
|Most Expensive||Least Expensive|
1. Louisiana ($1,968)
1. Oregon ($677)
2. Florida ($1,951)
2. Utah ($692)
3. Texas ($1,893)
3. Idaho ($730)
4. Oklahoma ($1,885)
4. Nevada ($755)
5. Kansas ($1,584)
5. Wisconsin ($779)
Now, if you’re renting, you’re not off the hook. You need enough renters insurance to replace your stuff if it gets stolen or destroyed in a fire or some other disaster. Without it, you’ll have to replace everything on your own dime. And since renters insurance only costs roughly $15 per month, there’s really no excuse for you not to have it!4
How Much Should You Pay for Health Insurance?
A trip to the emergency room turns into an emergency surgery, which then turns into a few days in a hospital bed to recover before you’re sent home. The costs add up, and soon you find yourself swimming in thousands of dollars in medical bills.
What about employer coverage? The average American worker paid $5,969 in 2021 for employer-sponsored group health insurance.7 The total cost of annual premiums (employer and employee) in 2021 for employer-offered coverage rose 4% over 2020 to $22,221. And the average deductible people paid was $1,669 for single coverage in plans that had a general annual deductible.8
But costs vary pretty widely based on factors like your age, the number of people on your plan, level of coverage, your location and employer. And if you’re looking to keep that monthly premium down to save some money in your budget, choose a higher deductible plan.
Here’s a breakdown showing the average costs of marketplace insurance depending on your state:
Kaiser Family Foundation, 2021.
How Much Should You Pay for Life Insurance?
Life insurance has one job: to help your family replace your income if you suddenly died. We recommend getting a 15- or 20-year term life insurance policy that covers 10–12 times the amount of your annual gross income. So how much does life insurance cost?
Well, if you’re a healthy 30-year-old who wants to take out a 20-year term life policy with $500,000 worth of coverage, you’d probably pay around $240 each year, or $20 a month.7
But the exact amount you’ll pay will vary based on the length of the policy, your age, your health history, tobacco use, gender and how much coverage you want.
The Right Coverage at the Best Price
So, how much will you pay on insurance? It depends on your situation.
As your life changes, so will your insurance needs. That’s why we created a free tool called the insurance coverage checkup. It helps you know how protected you are, what coverage you still need and what kind you can do without.
And if you feel like you’re paying too much for insurance, you might be! Many people just don’t take the time to shop around for new auto, homeowners or health insurance.
We get it. Shopping for insurance sounds like a hassle. But our Endorsed Local Providers (ELP) program gives you access to some of the best insurance agents in the country. They’ll shop for you and give you free quotes so you can know you’re not overpaying. And they’re RamseyTrusted, so they have the heart of a teacher and can explain to you what you need.